Correlation Between NVIDIA and International Equity

Can any of the company-specific risk be diversified away by investing in both NVIDIA and International Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NVIDIA and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA and International Equity Portfolio, you can compare the effects of market volatilities on NVIDIA and International Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NVIDIA with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and International Equity.

Diversification Opportunities for NVIDIA and International Equity

0.35

Correlation Coefficient

NVIDIA  International Equity

Weak diversification

The 3 months correlation between NVIDIA and International is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and International Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and NVIDIA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NVIDIA are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of NVIDIA i.e., NVIDIA and International Equity go up and down completely randomly.

Pair Corralation between NVIDIA and International Equity

Given the investment horizon of 90 days NVIDIA is expected to generate 0.72 times more return on investment than International Equity. However, NVIDIA is 1.39 times less risky than International Equity. It trades about -0.02 of its potential returns per unit of risk. International Equity Portfolio is currently generating about -0.14 per unit of risk. If you would invest  14,358  in NVIDIA on October 22, 2024 and sell it today you would lose (587.00) from holding NVIDIA or give up 4.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  International Equity Portfolio

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with NVIDIA and International Equity

The main advantage of trading using opposite NVIDIA and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, International Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in International Equity will offset losses from the drop in International Equity's long position.

The idea behind NVIDIA and International Equity Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.